Dividend taxation

We mention that the income from dividends is classified in the category of investment income (art.91 of the Fiscal Code), and when granting them, certain special rules must be observed.

In 2020, the tax rate for dividend incomes is 5% \: “Income in the form of dividends, including the profit obtained as a result of holding participation titles defined by the legislation in this matter at collective investment bodies, is imposed with a share of 5% of their sum, the tax being final”, according to the Fiscal Code.

Dividend tax must be calculated, withheld and paid to the state by the companies that pay these revenues to individuals, but the rule applies even if dividends are paid to another company (legal entity).

The tax must be declared by the form 100 and paid until the 25th of the month following the one in which the dividends are paid.

“In the case of dividends/gains obtained as a result of holding shareholdings, distributed, but not paid to shareholders/associates/investors until the end of the year in which the annual financial statements were approved, the tax on dividends/earnings is paid until the 25th of January, including the following year ”, is explained in the Code regarding the distributed but unpaid dividends.

Health Insurance (CASS) for dividend income:

Regarding the obligation of Health Insurance (CASS), according to art.170 paragraph (2) letter.e) of Law 227/2015 regarding the Fiscal Code, “(1) The natural persons who realize the incomes provided for in art.155 paragraph (1) letter. b) -h), from one or more sources and/or categories of incomes, owes the contribution of social health insurance, if it estimates for the current year incomes whose cumulative value is at least equal to 12 gross minimum wages in the country, in force at the time of submission of the declaration provided at art. 120.

The inclusion in the annual limit of at least 12 minimum gross wages in the country, in force at the deadline for submission of the declaration provided for in art. 120 (Single Declaration) is made by cumulating the income provided for in art. 155 para. (1) letter b) -h).

We take into account the fact that in calculating CASS related to dividend income, the dividends distributed and collected starting with 2018 are taken into account. Therefore, the single declaration by the associate for dividends distributed before 2018 should not be filed.

For the periods prior to the year 2018, the taxation regarding the CASS is made by the fiscal authority according to the form 205 “Informative statement regarding the tax withheld at the source and the gains/losses realized, on income beneficiaries” submitted by the company, according to the realized revenues, the legal limits and the fiscal legislation specific to each year.

According to art.154 lit. h) and h ^ 1) of Law no. 227/2015 regarding the Fiscal Code, are exempted from the payment of the contribution of social health insurance the following categories of natural persons:

  • the natural persons who have the quality of pensioners, for the income from the pensions, as well as for the incomes obtained from intellectual property rights;
  • natural persons who make income from wages and assimilate to wages, for the revenues from intellectual property rights.

Attention! In the category of these exemptions from the payment of CASS, there is also the income from dividends.        

Therefore, if the natural person who received income from dividends above the limit of 24,960 lei, in 2019, has the quality of pensioner and/or employee, this does not exempt her from the payment of CASS at the rate of 10%, that is from the payment the sum of 2,496 lei.

According to art. 174 paragraph 10 of Law no. 227/2015 regarding the Fiscal Code, “The natural persons beginning in the fiscal year, to carry out the activity and/or to make income, from those provided in art. 155 lit. b) – h), and the cumulative annual net income from one or more sources and / or categories of income, except for the revenues from intellectual property rights, from the lease or from associations with legal persons, taxpayers according to title II, title III of Law no. 170/2016, for which the tax is withheld at source, estimated to be realized for the current year is at least equal to the level of 12 gross minimum wages in the country, recalculated according to the number of months remaining until the end of the fiscal year, are required to submit the declaration provided in par. (3) within 30 days from the date of the event. The minimum gross wage in the country guaranteed for payment is the one in force at the date of filing the Declaration ”.

Annual or quarterly dividends:

We remind you that, according to the Accounting Law, a dividend is a share of the company’s profit, which is paid to each associate.

Dividends can be divided both annually, after the end of the financial year and quarterly, during it, but only if there is a profit from which to make money.

Under the conditions in which the quarterly distribution goes, this is done only on the basis of the interim financial statements, and if it goes on the annual distribution, this is done only on the basis of the annual financial statements. Specifically, the payment can be made quarterly, at a deadline set by the general meeting of the associates or by special law, and at the end, regularization of the differences through the annual financial statements is made.

Payment of the differences resulting from regularization is made within 60 days from the date of approval of the annual financial statements.

Specifically, if you opt for interim dividends, the profit can be divided much faster than if you opt for the ordinary procedure. If in the first case it is possible to divide the dividends during the financial year, after the end of each quarter of the year, in the second case it is possible only after the financial year ends and the annual financial statements are drawn up.

The annual financial statements can only be drawn up in the following year, within 150 days from the end of the reporting year. Both categories of balance sheets must be submitted to the tax authorities – the first within 30 days from the internal approval, and the others until the mentioned term.

We underline that the accounting rules for dividend distribution are included in the Order of the Ministry of Finance 1.802 / 2014 (the individual annual financial statements and the consolidated annual financial statements) and in the Order of the Ministry of Finance 2.844 / 2016 (International Financial Reporting Standards).

Payment of cash dividends:

Regarding the payment of cash dividends, according to art.4 paragraph 4 of Law no.70 / 2015, the cash payments operations performed to natural persons representing the value of the dividends are carried out by placing in the daily limit of 10,000 lei to one person, the payments being forbidden fragmented in cash to one person, for transactions greater than 10,000 lei.

The payment can be considered fragmented even if it is made in consecutive days/months, under the conditions in which the obligation of the company related to the dividends distributed to the associates/shareholders and remaining to be paid is based on a single act – the decision of the general meeting by which the profit for the dividends was distributed.

Even if one decides to adopt a General Meeting of Shareholders – decision at each dividend payment, such a situation could be considered by the control bodies as being contrary to the provisions of Law no.70 / 2015, which may attract the sanction of the company during the controls carried out at society.

According to art.12 paragraph 1 of Law no.70 / 2015 the non-observance of the limit of 10,000 lei constitutes a contravention if it was not committed in such conditions that, according to the criminal law, it constitutes an offense. The contravention is sanctioned with a fine of 10% of the amount paid which exceeds the limit specified for this type of operation, but not less than 100 lei.

Therefore, the payment of cash dividends in the maximum amount of 10,000 lei in cash for each associate/shareholder is recommended, the difference being paid by bank transfer.